Patent Explosion

The past twenty years has seen increadible increases in the number of patents both applied for and issued. In her most recent paper (PDF), Berkeley professor and empirical whiz, Bronwyn Hall, examines patenting data and arrives at some interesting conclusions.

1) Although patenting has increased in most technological fields, the explosive growth is largely accounted for by electrical and computing fields. 2) The explosion is drivin, for the most part, by U.S. firms, with some contribution from Asia and Europe. 3) Patenting has become a critical signal of viability for new entrants in many industries.

Professor Hall’s data shows that in most industries, increases in patenting were drivin by new entrants. However, patenting increases in electrical and computing industries were accomplished by a shift in patenting by industry stalwarts.

The figures reveal the following interesting fact: although the jump in patent applications within the U.S. occurred in all technology classes, when we look by broad industry class, we find that it occurred only in firms that are in the electrical, computing and instruments industries. That is, the increase in chemicals, mechanical and other technologies appears to have been driven by increasing patenting activity by firms that were not traditionally in these industries. This result is consistent with the view that there has been a major strategic shift in patenting in the electrical/computing industries, but not in other industries.

UPDATE: Professor Hall provided a correction to my original interpretation of her results. She interprets her results as showing “that patents held by new entrants in the electrical and computing industries became more valuable post-1985 than those held by incumbents, whereas there was no change in the chemicals-based sectors.”

According to Hall, new entrants need patents to as a basic proof of concept or a show of viability. Incumbents, on the other hand, often use patents defensively to ward off litigation and for cross-licensing. Thus, for an incumbent, a large patent portfolio may be an indication that it fears being sued for infringement.